BlackRock’s Massive Q1 ETF Inflows Propelled Its Earnings Higher

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April 24, 2017 6:34am NYSE:BLK NYSE:ITOT

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From Zacks: BlackRock Inc. (BLKFree Report) reported adjusted earnings of $5.25 per share in the first quarter of 2017, crushing the Zacks Consensus Estimate of $4.94 and improving 24% from the year-ago quarter. The company recorded a 100 basis point rise in margins.


A solid improvement in assets under management (AUM) seems to have spurred the earnings beat. The company witnessed strong inflows during the quarter. ETF investors should be happy to know that BlackRock’s assets under management surpassed $5.4 trillion at the end of first-quarter 2017 (up 14%), mainly due to soaring sales of its iShares exchange traded funds.

Though the world’s largest asset manager’s revenues of $2.82 billion lagged the Zacks Consensus Estimate of $2.88 billion, the top line grew 8% year over year.

Reason Behind BlackRock’s Success about ETF Inflows

The company’s iShares bond and equity ETFs were responsible for $64 billion of the total $80 billion in net inflows, as per an article published on Financial Times. Per management, iShares ETFs are increasingly gaining popularity among both retail and institutional investors.

BlackRock entered into the battle of fee cuts in recent times having slashed expense fees for some of its iShares ETFs. It is being said that the company took the step to provide tough competition to other low-cost players like Vanguard and Schwab (read: 6 ETF Trends Likely to Take Centre Stage in 2017).

For example, BlackRock lowered fees for its S&P 500 tracking ETF, iShares Core S&P 500 (IVVFree Report) , from 0.07% to 0.04%. The fee cut made IVV less expensive than other popular ETFs in its domain. Other two popular S&P 500 ETFs namely SPDR S&P 500 ETF (SPYFree Report) and Vanguard S&P 500 ETF (VOOFree Report) charge 9 bps and 5 bps in fees.

BlackRock management also said that it opted for the cuts on the back of a new set of rules under the Department of Labor’s “fiduciary standard,” which asked advisors to give precedence to their clients’ interest over their owns. Meanwhile, fees cuts made those particular ETFs one of the cheapest options within their domain (read: Buy These ETFs as BlackRock Cuts Fees).

Overall, the iShares family of exchange-traded funds, which track almost all the key indexes, hold the key to BlackRock’s success (read: BlackRock Slashes Fees, ETF Price War Intensifies).

ETFs in focus

Let’s take a look at Q1 inflows (as per etf.com) of some iShares ETFs that have undergone fee cuts lately.

iShares Core S&P 500 ETF (IVVFree Report) – $6.15 billion

iShares Core S&P Total Stock Market ETF ((ITOTFree Report) ) – $1.40 billion

iShares Core S&P Mid-Cap ETF (IJHFree Report) – $3.02 billion

iShares Core S&P Small-Cap ETF (IJRFree Report) – $3.51 billion

iShares Core MSCI Total International Stock ETF (IXUSFree Report) $868 million

iShares Core MSCI EAFE ETF ((IEFAFree Report) ) – $4.03 billion

iShares Core MSCI Emerging Markets ETF (IEMGFree Report) – $6.63 billion

iShares Core U.S. Aggregate Bond ETF (AGGFree Report) – $1.60 billion

iShares Core S&P U.S. Growth ETF (IUSGFree Report) – $206.8 million

The iShares S&P 1500 Index Fund ETF (NYSE:ITOT) rose $0.33 (+0.61%) in premarket trading Monday. Year-to-date, ITOT has gained 4.93%, versus a 4.95% rise in the benchmark S&P 500 index during the same period.

ITOT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #12 of 108 ETFs in the Large Cap Blend ETFs category.


This article is brought to you courtesy of Zacks Research.


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